Is it conservative to assume a 5% annual return on a S&S LISA - Vanguard 100

RobHT

cloud_dog said:

It is not just 'risky and turbolent stock' that experience the same impact.

Just anecdotally, if you look back at the February 2020 sell-off, we all experienced liquidity issues.  I tend to invest in exchange traded funds (ETFs and ITs), and ones which are common and relatively liquid, e.g. global ETF etc.  At the time of the sell off I could not get prices to trade from 3 of my 4 brokers.  And, I think the fourth one was limiting the size of trades. 

How you do not think crypto cannot be affected in a like for like manner is a little beyond me TBH.  Sometimes things just do not go the way we think they should.  

Illiquid ETFs? Quite a rare event, and in any case, you shouldn't time the market, so, why should you be concerned?

Out of curiosity, for how long did you experience that? One day? One hour?

RobHT

masonic said:

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

The market is always liquid, unless there is a insolvency process or similar behind, at that time it's too late, the big guys already jumped off the boat.

Also in the case of penny stocks there is enough liquidity, but it's important to consider that it's much less liquid than Nasdaq, therefore, you won't be able to sell a huge amount of shares in a single transaction, but if your broker is decent enough, it will manage that for you also for days ahead, not bad ah.

When things are good, then there's plenty of liquidity. When everyone wants to jump ship, there isn't. You can't make the assumption that you'll be able to cash out at any time, if any time includes times when everyone else is of a like mind, or, as you say, there is no market on which to sell. There's also selling at a reasonable price, and selling for whatever you can get. In short, you can't rely on being able to cash out this sort of investment at any time by any reasonable definition of 'cash out' and 'any time'.

My sentence was simplified, I know that I could sell for a loss! But the point of cashing out is not to cash out all, but cash out to bear the emergencies...

No, I'm not an edge fund, I can easily cash out in most of my stocks without concerns, and if this concerns you too much, then buy funds, keeping in mind the objectives though .

Well that is my point entirely. You are not going to be in control of the timing of your emergencies, and your emergency selling could span the whole spectrum of possible outcomes, from selling for a good price, right through selling for a substantial loss, or being unable to get any orders executed (as happens from time to time during periods of panic in the markets). Funds have their issues too, and are sometimes gated or suspended from trading. Investing is a long term activity, so most of us do not need to access our investments at a particular point in time. Money to cover emergencies would generally be placed somewhere that it is more readily accessible and not at risk.

This is your second obvious message.
Yes, we are on the same page on these things, my concerns about this thread were others.

Apologies for stating the obvious, but in this case the obvious contradicted your argument that you can always cash out of investments whenever you want to.

RobHT said:

Btw, funds don't go easily busted, and in any case, it's so difficult to lose all the money.

Probably you are referring to ETFs or weird managed funds that promise 6-20% dividends...

At the risk of stating the obvious again, when a fund is suspended or gated, the fund does not go bust and investors don't lose all of their money. They simply cannot sell their holdings until the suspension or gating is lifted, which could be after a number of days or weeks. This is in reference to open ended funds, not ETFs (although those could in theory be temporarily suspended from the stockmarket) or "weird managed funds that promise 6-20% dividends".

My friend, the impossible can always happen and you can't stop it, it will always happen in the worst moment and with the worst magnitude.
So, if we need to consider every case, why we don't consider the next catastrophic war or nuclear contamination on a large scale? (both militar and from nuclear plants)

Let's talk with only Apples on the table, that's my point .

Yes, even if the fund doesn't get halted for a while, selling may take also one week, but again, we already know these things, but you can still sell and take out a nice portion of money for emergencies, most probably with a little loss or huge loss but with much less probability.
Emergency for me is when I have an empty bank account and no income.

There's no point worrying about risks that you cannot mitigate. War and nuclear events are not in my circle of concern. An empty bank account and no money coming in is something I can take steps to avoid, as is being forced to sell investments at an inopportune time.

Coming back to the matter at hand, you've mentioned two types of asset that "You can also cash out at any time, think about the most IMPORTANT BENEFIT": crypto and growth stocks. I must admit, I don't even fully understand how we got to here from there, but I'm just going to take your most recent post as acknowledgement that you were using some poetic licence with "at any time". Presumably if your crypto was down 80% from its peak, your stock portfolio would be sufficiently diversified that you could find something you could sell without incurring a similar sized loss, you'd be ok with any loss you did suffer, and you'd have enough cash to bridge the gap if it did take time to execute your trade, have it settle, and get it out to your bank account.

All of this was in comparison with a LISA, which... you can cash out at any time for a small net loss.

My portfolio is diversified, I have exp growth stocks but not only those, no investor invests only in risky and turbolent markets/stocks.

But there's been a time where I relied only on my cash (just waiting the time to rebalance), therefore, that was my emergency fund, the rest were only exp growth stocks and cryptos (very little amount), this was an exceptional situation and I made it in a way that the cash was enough for emergencies, luckily I hadn't any problem but as I said, if you meet a very bad situation, nothing will save you.

Some people do only invest in risky and turbulent investments. Some people make crypto a significant part of their investment portfolio. It is good that you have fallen into neither of these traps.

For most people, the very bad situation they will face is a loss of income for several months, with no eligibility for means tested benefits because of their investments. An emergency fund will save you from making bad investment trades during such a period if you are unlucky enough to be made redundant during a recession and high unemployment for example. Over the years, as you build your wealth, a further objective could be to be able to live off your investments if you become unable to work. This is a risk that becomes more relevant the older you become. Even having the option to give up work, or work less and/or do something you love for less money, is a valuable option to have. In any of these scenarios, managing drawdowns of investments by maintaining a suitable cash buffer and/or low risk investments like bonds, is important.

RobHT said:

If you cash out from a LISA without following the rules for cash out (like to buy the first house) I think you lose a lot .

If you cash out of a LISA and pay the penatly, the net effect of receiving the 25% bonus, then paying the 25% penalty, is a loss of 6.25%. If you wish to use a LISA to save for a property purchase, you are doing so because of the attractiveness of the 25% bonus. You have to weigh up the relative probabilities that you will actually be able to use the LISA for this purpose vs switch it to a retirement fund vs withdraw the money with a penalty. Those who use the LISA for retirement should be investing in a S&S LISA, so are already taking on the kind of risk the LISA wrapper carries. If they have taken the sensible steps of holding an emergency fund, plus a S&S ISA/unwrapped investments, then it is highly unlikely they'd be forced to sell and spend all of their other assets and then have to turn to the LISA.

For most people, a 90% chance of getting an extra 25%, vs a 10% chance of a loss of 6.25% is a risk worth taking. At some point the risk/reward becomes not worth it (a 20% chance of you buying a home with your LISA would be the breakeven probability), but the vast majority of people who use LISAs for saving for their first property purchase or retirement do so with a very high degree of confidence that they use the LISA for its intended purpose, so it is a no brainer for them. For retirement, LISAs obviously aren't the only game in town, but the 'access with penalty' model may actually be preferable to some than a SIPP, where they could not access the money early except if terminally ill, no matter how desperate for money they were.

All good but...

In the last part of your message, you assume that the people have a very high degree of discipline, which is not what I've seen around me or in this forum, which goes hand by hand.
If the people would be doing what they are supposed to, discussions like this one would have never started, same for the other topics that came out.

You can't be serious on that, you can't...
I could mention again all the mistakes the people do and how to avoid them, but I guess that we would turn around always to the same conversation.

At the end, this conversation doesn't have an end, because the situation of everyone else is different and no one knows how to manage it (apart a few people and at some level), so I'll keep hammering people when I hear stupid statements, or stupid choices like "I buy an house and I'll be happy, rich and one day I'll die in my paid house/box", LOL, it sounds really like a story for kids, when you are being convinced that it is what it is and you have to do it because otherwise the bad people will follow you during night...

Like Buffet said a long time ago, if you have the cash for buying Coca Cola and you don't tell me when you'are gonna get these money back after the purchase, you should not invest...
As of today, I don't remember to have heard that answer from him, or someone close to him, but I think I know what he meant . (there are a couple of answers you could give, but one is definitely more important)

Not even a single person here mentioned how to manage personal finances like a business, on top of IF investing is right for them or not.

You mentioned good points and I do believe that you know something about it, but ok, it's me and you, then who else?
More than 50% of the population has less than 1000 pounds in savings, this is valid since more than a decade probably, so don't take covid as an excuse.
With that said, do we even need to talk about investments where the other 49% of people would make every possible mistake in life?
This would be an hypothetic end of this conversation for me, but I do like to talk about it and lose my time, I guess...

Don't forget "peace and love", at the end, I give good recommendations .

Note that my ROI in the last 2y of trading has been among the highest in the market where investors are audited in public, so, I must be a good idiot then .
But I'll let people know what's gonna happen in the following years, I have still some secret weapon to sell which will 3x my entire cash pile by itself ONLY (nicely in my ISA), I own something like 80 stocks and some fund and cryptos...

Now, don't forget that all that doesn't make a damn sense if people don't know how to manage finances, it's like having a weapon in front of your enemy disarmed, and you shoot your feet in the meanwhile you reload because you never held a weapon before...
Many could have been me, spotting 100X opportunities (yes I sold out at that level), 30X, 15X, I can thrown very big numbers, but if I didn't know how to manage my wealth, I would have been dead already, between heavy drugs or other common traps, or eventually just lost my money in other ways, maybe with depreciative assets like cars or stupid items like the majority out there.

masonic

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

masonic said:

RobHT said:

The market is always liquid, unless there is a insolvency process or similar behind, at that time it's too late, the big guys already jumped off the boat.

Also in the case of penny stocks there is enough liquidity, but it's important to consider that it's much less liquid than Nasdaq, therefore, you won't be able to sell a huge amount of shares in a single transaction, but if your broker is decent enough, it will manage that for you also for days ahead, not bad ah.

When things are good, then there's plenty of liquidity. When everyone wants to jump ship, there isn't. You can't make the assumption that you'll be able to cash out at any time, if any time includes times when everyone else is of a like mind, or, as you say, there is no market on which to sell. There's also selling at a reasonable price, and selling for whatever you can get. In short, you can't rely on being able to cash out this sort of investment at any time by any reasonable definition of 'cash out' and 'any time'.

My sentence was simplified, I know that I could sell for a loss! But the point of cashing out is not to cash out all, but cash out to bear the emergencies...

No, I'm not an edge fund, I can easily cash out in most of my stocks without concerns, and if this concerns you too much, then buy funds, keeping in mind the objectives though .

Well that is my point entirely. You are not going to be in control of the timing of your emergencies, and your emergency selling could span the whole spectrum of possible outcomes, from selling for a good price, right through selling for a substantial loss, or being unable to get any orders executed (as happens from time to time during periods of panic in the markets). Funds have their issues too, and are sometimes gated or suspended from trading. Investing is a long term activity, so most of us do not need to access our investments at a particular point in time. Money to cover emergencies would generally be placed somewhere that it is more readily accessible and not at risk.

This is your second obvious message.
Yes, we are on the same page on these things, my concerns about this thread were others.

Apologies for stating the obvious, but in this case the obvious contradicted your argument that you can always cash out of investments whenever you want to.

RobHT said:

Btw, funds don't go easily busted, and in any case, it's so difficult to lose all the money.

Probably you are referring to ETFs or weird managed funds that promise 6-20% dividends...

At the risk of stating the obvious again, when a fund is suspended or gated, the fund does not go bust and investors don't lose all of their money. They simply cannot sell their holdings until the suspension or gating is lifted, which could be after a number of days or weeks. This is in reference to open ended funds, not ETFs (although those could in theory be temporarily suspended from the stockmarket) or "weird managed funds that promise 6-20% dividends".

My friend, the impossible can always happen and you can't stop it, it will always happen in the worst moment and with the worst magnitude.
So, if we need to consider every case, why we don't consider the next catastrophic war or nuclear contamination on a large scale? (both militar and from nuclear plants)

Let's talk with only Apples on the table, that's my point .

Yes, even if the fund doesn't get halted for a while, selling may take also one week, but again, we already know these things, but you can still sell and take out a nice portion of money for emergencies, most probably with a little loss or huge loss but with much less probability.
Emergency for me is when I have an empty bank account and no income.

There's no point worrying about risks that you cannot mitigate. War and nuclear events are not in my circle of concern. An empty bank account and no money coming in is something I can take steps to avoid, as is being forced to sell investments at an inopportune time.

Coming back to the matter at hand, you've mentioned two types of asset that "You can also cash out at any time, think about the most IMPORTANT BENEFIT": crypto and growth stocks. I must admit, I don't even fully understand how we got to here from there, but I'm just going to take your most recent post as acknowledgement that you were using some poetic licence with "at any time". Presumably if your crypto was down 80% from its peak, your stock portfolio would be sufficiently diversified that you could find something you could sell without incurring a similar sized loss, you'd be ok with any loss you did suffer, and you'd have enough cash to bridge the gap if it did take time to execute your trade, have it settle, and get it out to your bank account.

All of this was in comparison with a LISA, which... you can cash out at any time for a small net loss.

My portfolio is diversified, I have exp growth stocks but not only those, no investor invests only in risky and turbolent markets/stocks.

But there's been a time where I relied only on my cash (just waiting the time to rebalance), therefore, that was my emergency fund, the rest were only exp growth stocks and cryptos (very little amount), this was an exceptional situation and I made it in a way that the cash was enough for emergencies, luckily I hadn't any problem but as I said, if you meet a very bad situation, nothing will save you.

Some people do only invest in risky and turbulent investments. Some people make crypto a significant part of their investment portfolio. It is good that you have fallen into neither of these traps.

For most people, the very bad situation they will face is a loss of income for several months, with no eligibility for means tested benefits because of their investments. An emergency fund will save you from making bad investment trades during such a period if you are unlucky enough to be made redundant during a recession and high unemployment for example. Over the years, as you build your wealth, a further objective could be to be able to live off your investments if you become unable to work. This is a risk that becomes more relevant the older you become. Even having the option to give up work, or work less and/or do something you love for less money, is a valuable option to have. In any of these scenarios, managing drawdowns of investments by maintaining a suitable cash buffer and/or low risk investments like bonds, is important.

RobHT said:

If you cash out from a LISA without following the rules for cash out (like to buy the first house) I think you lose a lot .

If you cash out of a LISA and pay the penatly, the net effect of receiving the 25% bonus, then paying the 25% penalty, is a loss of 6.25%. If you wish to use a LISA to save for a property purchase, you are doing so because of the attractiveness of the 25% bonus. You have to weigh up the relative probabilities that you will actually be able to use the LISA for this purpose vs switch it to a retirement fund vs withdraw the money with a penalty. Those who use the LISA for retirement should be investing in a S&S LISA, so are already taking on the kind of risk the LISA wrapper carries. If they have taken the sensible steps of holding an emergency fund, plus a S&S ISA/unwrapped investments, then it is highly unlikely they'd be forced to sell and spend all of their other assets and then have to turn to the LISA.

For most people, a 90% chance of getting an extra 25%, vs a 10% chance of a loss of 6.25% is a risk worth taking. At some point the risk/reward becomes not worth it (a 20% chance of you buying a home with your LISA would be the breakeven probability), but the vast majority of people who use LISAs for saving for their first property purchase or retirement do so with a very high degree of confidence that they use the LISA for its intended purpose, so it is a no brainer for them. For retirement, LISAs obviously aren't the only game in town, but the 'access with penalty' model may actually be preferable to some than a SIPP, where they could not access the money early except if terminally ill, no matter how desperate for money they were.

All good but...

In the last part of your message, you assume that the people have a very high degree of discipline, which is not what I've seen around me or in this forum, which goes hand by hand.
If the people would be doing what they are supposed to, discussions like this one would have never started, same for the other topics that came out.

You can't be serious on that, you can't...

I don't know which parts of the forum you frequent, but over here in the Savings & Investments section, most contributors are quite financially disciplined. I could count on one hand the number who are giving off signals of not being in control or not having a sense of reality about their finances.

The OP in this thread claims to be able to save £5k per year. Elsewhere claims to have over £30k in cash savings not doing anything and wonders if overpaying mortgage would be worthwhile. So not tripping any financial recklessness flags.

RobHT said:

I could mention again all the mistakes the people do and how to avoid them, but I guess that we would turn around always to the same conversation.

At the end, this conversation doesn't have an end, because the situation of everyone else is different and no one knows how to manage it (apart a few people and at some level), so I'll keep hammering people when I hear stupid statements, or stupid choices like "I buy an house and I'll be happy, rich and one day I'll die in my paid house/box", LOL, it sounds really like a story for kids, when you are being convinced that it is what it is and you have to do it because otherwise the bad people will follow you during night...

Like Buffet said a long time ago, if you have the cash for buying Coca Cola and you don't tell me when you'are gonna get these money back after the purchase, you should not invest...
As of today, I don't remember to have heard that answer from him, or someone close to him, but I think I know what he meant . (there are a couple of answers you could give, but one is definitely more important)

Not even a single person here mentioned how to manage personal finances like a business, on top of IF investing is right for them or not.

You mentioned good points and I do believe that you know something about it, but ok, it's me and you, then who else?
More than 50% of the population has less than 1000 pounds in savings, this is valid since more than a decade probably, so don't take covid as an excuse.
With that said, do we even need to talk about investments where the other 49% of people would make every possible mistake in life?
This would be an hypothetic end of this conversation for me, but I do like to talk about it and lose my time, I guess...

Don't forget "peace and love", at the end, I give good recommendations .

Note that my ROI in the last 2y of trading has been among the highest in the market where investors are audited in public, so, I must be a good idiot then .
But I'll let people know what's gonna happen in the following years, I have still some secret weapon to sell which will 3x my entire cash pile by itself ONLY (nicely in my ISA), I own something like 80 stocks and some fund and cryptos...

Now, don't forget that all that doesn't make a damn sense if people don't know how to manage finances, it's like having a weapon in front of your enemy disarmed, and you shoot your feet in the meanwhile you reload because you never held a weapon before...
Many could have been me, spotting 100X opportunities (yes I sold out at that level), 30X, 15X, I can thrown very big numbers, but if I didn't know how to manage my wealth, I would have been dead already, between heavy drugs or other common traps, or eventually just lost my money in other ways, maybe with depreciative assets like cars or stupid items like the majority out there.

There certainly are a lot of people with very little in savings and not much prospect of changing that. They tend not to be the sort of people who have any interest in a LISA (or even know what one is), and they are not the type to frequent saving and investment forums. I have very little concern that someone in that category would see one of my posts highlighting the features of a LISA, rush out to get one, throw their £1k life savings into it, and then realise they'll need it to survive the coming winter with their massively inflated energy bills, food prices, petrol costs etc. They are no less likely to land on a thread about crypto, investments, etc, and make a similarly poor knee-jerk reaction. An aborted £1k LISA (outside the cooling off period) will cost them £62.50, whereas they could be a lot worse off if they start buying investments inappropriately. Very unlikely anything like this would happen, and we can't deprive everyone else of such discussions just because there may be one or two reading who might do something stupid after misunderstanding things. There are of course warnings given by all providers about the risks and key features of such products.

I'll take this latest stream of consciousness as a sign you are handling the heavy drugs quite well

Apodemus

In reference to the discussion above about investments being gated.  As recently as 2020, my entire pension was effectively gated.  Not because it was invested in anything weird, but simply because a very small percentage of my Scottish Widows pension was in one of their in-house property funds, which they had gated.  I was completely unaware that this small mistake on my part could lock up my whole pension for six months.  So it pays to read the small print and be aware that you can experience liquidity problems even when invested with large, safe institutions.

cloud_dog

RobHT said:

cloud_dog said:

It is not just 'risky and turbolent stock' that experience the same impact.

Just anecdotally, if you look back at the February 2020 sell-off, we all experienced liquidity issues.  I tend to invest in exchange traded funds (ETFs and ITs), and ones which are common and relatively liquid, e.g. global ETF etc.  At the time of the sell off I could not get prices to trade from 3 of my 4 brokers.  And, I think the fourth one was limiting the size of trades. 

How you do not think crypto cannot be affected in a like for like manner is a little beyond me TBH.  Sometimes things just do not go the way we think they should.  

Illiquid ETFs? Quite a rare event, and in any case, you shouldn't time the market, so, why should you be concerned?

Out of curiosity, for how long did you experience that? One day? One hour?

Unsure if you are misquoting me on purpose or in error.  I never stated illiquid ETFs.  I said we (I) experienced liquidity issues in the general term within the market.  I confirmed that the investments were/are not illiquid investments as that could, under normal circumstances, have a bearing on my experience.  I did this so people who read my post could have as full an understanding as possible.

Why shouldn't I time the market in a period of extreme volatility?  Just because it isn't comfortable for some, it doesn't make it unreasonable.  I've never bought at the bottom and never sold at the top, but I have been very comfortable with my results, and how that fitted in with my overall strategy for the money.

How long it lasted for was/is an irrelevancy, the fact that it occurs is the key point.  It occurred at a time when I wanted to transact something.  Not unreasonably it was also a time when many other people/bots wanted to transact something.  It is therefore not unreasonable to project that in similar circumstances crypto would experience similar situations. 

masonic

I was also struggling to buy one or two investment trusts that had fallen to crazy discounts. I had to route my orders to dealer and have them executed manually, which took several hours, but I did get in albeit not at such a great price as I could have if live quoting was working. The problems lasted 2-3 days from what I remember. There were a few threads started by people experiencing problems, including duplicate orders from repeated attempts.

Albermarle

I don't know which parts of the forum you frequent, but over here in the Savings & Investments section, most contributors are quite financially disciplined. I could count on one hand the number who are giving off signals of not being in control or not having a sense of reality about their finances.

In fact many contributors are probably overly cautious if anything, not so much in what they invest in but whether they have enough to retire.

RobHT

Apodemus said:

In reference to the discussion above about investments being gated.  As recently as 2020, my entire pension was effectively gated.  Not because it was invested in anything weird, but simply because a very small percentage of my Scottish Widows pension was in one of their in-house property funds, which they had gated.  I was completely unaware that this small mistake on my part could lock up my whole pension for six months.  So it pays to read the small print and be aware that you can experience liquidity problems even when invested with large, safe institutions.

Good to know, but I don't think you can cash out your pension, so, it's not a concern for most of us.
If you are talking about the lump sum that the gov allows you to withdraw at 55, then ok you were unlucky, but normally you can't cash out your pension, and even if you do, then what next...

RobHT

masonic said:

I was also struggling to buy one or two investment trusts that had fallen to crazy discounts. I had to route my orders to dealer and have them executed manually, which took several hours, but I did get in albeit not at such a great price as I could have if live quoting was working. The problems lasted 2-3 days from what I remember. There were a few threads started by people experiencing problems, including duplicate orders from repeated attempts.

I do believe you, but these things happen on daily basis to traders that make 10-20 transactions a day, especially high speed trading, so why not to you, it's normal, it just happens less because you buy/sell less.

RobHT

Albermarle said:

I don't know which parts of the forum you frequent, but over here in the Savings & Investments section, most contributors are quite financially disciplined. I could count on one hand the number who are giving off signals of not being in control or not having a sense of reality about their finances.

In fact many contributors are probably overly cautious if anything, not so much in what they invest in but whether they have enough to retire.

That's a perception then, just because they invest in investments with risk level kindergarden, it doesn't mean they are not taking risks, or it doesn't mean that they know what they are doing, I hope you understand my point of view now.

When I see people taking mortgages at any cost, for box accommodations made with paper in this though moment, I do question myself about the human development of the last couple of centuries...

In this thread, the main topic was the LISA, another scheme that locks your money and your freedom to really make money instead of coins, but still, people don't get it.
Also, the advertisement that you can pull out the money for your first house is just a trap, don't you see it?
They force everyone to believe that buying a box is the way to go in life, well, you are just playing their game, remember that UK is a business focused country, they sell crap to people that dream, is it not that the job of a salesman?

The majority of areas I've seen in UK (I travel a lot), they look so bad that a war zone looks better...
From London up to the north England (it's mainly about England though), same crap, when I talk to people they are always complaining the same things:
1. My accomodation is small but cozy. Well, then it sucks because you can barely breath inside and you don't even have space for a kid, which they plan to have
2. My area is the worst in the city, but what choice do I have. Awesome!
3. Hippy mode. "My ares is the best in London and I can get to any pub in 10 minutes with the train (but it's actually the metro)". Typical Londoner living under drugs and broken bank account...

I mean, are you serious now?